At the Game Developers Conference this year, a wide swath of investors, execs and developers are all but declaring the imminent demise of traditional console game development, thanks to the rise of social, mobile and digital games, plus new tech.

Few people are less likely to agree with that perspective than Epic's Mark Rein. "How'd that Modern Warfare 2 do," he joked at the event, where he showed Gamasutra the latest updates to the company's Unreal Engine 3 -- including the tech performing on not just an iPhone, but a new model Palm Pre -- plus a tech demo on PC in stereoscopic 3D.

Doing More With Less

The company's far from slowing down in its aims to offer developers a platform to create bleeding-edge, graphically-rich AAA games. For one, UE3 has added the ability to animate all kinds of surfaces separately from objects realtime using its Material Editor.

It's also added to the particle system "ribbons" that spawn particles based on object movements -- water spray, air streams and blood expectoration, for example, behave in a more physically lifelike way. There's now support for volume-based lighting on particles, too. Thanks to the integration with Autodesk's HumanIK, characters interact with their environment in a more believable way using few animations.

But even though it maintains a pole position in the industry's march toward ever more lifelike AAA games, "We’re making our business do more things," Rein tells us.

These initiatives include offering the free Unreal Developer Kit to creators and projects of all sizes and the company's visible thrust into the mobile space, including Apple's recently-announced iPad "at some point."

Going Mobile, Going Everywhere

"Our move into mobile games has nothing to do with the mobile games of today… it’s about the mobile games of tomorrow," Rein explains. "Every year, the phone handset is two times as powerful as the one before. Tim Sweeney will tell you we’re only 3, 4 switches away from being able to run AAA content on mobile."

This means "content and tools like ours are more relevant and more important," Rein says. "AAA's not going away. AAA's going everywhere."

Maybe the new browser-based and social gaming rush will never go AAA, Rein caveats, but a new option or a new subsection of the game industry is simply a different choice, not a replacement. Trying to assert that new models will replace AAA is like suggesting the film industry would make more if it stopped investing in films like Avatar and instead made hundreds of low-budget games.

When it comes to industry analysts and VC's doom bells for the console industry, "I don’t understand the relevance of it," states Rein. "These are guys trying to make their investment pay off – more power to them."

Keeping Up With Tools

Better tools and increased efficiency will help game development keep up with emerging trends. "When we can come up with a technique that makes us more efficient, our customers can be more efficient as well," says Rein.

In that vein, among UE3's new features is a new spline deformation tool that lets developers shape and create objects in realtime using only a single mesh -- think of building curling vines or train tracks in real time simply by pulling on one mesh.

"I think technically for the number of minutes of gameplay on the screen, we're either able to make better quality in the same [amount of] time, or make more minutes for the same price," Rein says. "Better tools let you do more with less."

Epic also unveiled an impressive procedural city-building tool aimed to allow developers to create complex systems from simple shapes: in the demonstration we saw, square volumes of any size could be auto-fit with surface textures to create buildings instantly.

A geometry system analyzes the surface it's working with and auto-trims meshes to fit the volume automatically -- and it continues to adjust as developers are able to vertex-edit directly on top of it.

Rein says that the procedural tool now handles so much of the work that there's more resources available for other details, animations and surface details.

Part of the argument that traditional development is doomed is that its budgets have been increasing -- but according to Rein, better tools mean that AAA development costs can decrease, not ramp up annually, keeping it a viable proposition.

The Future Of Consoles

What about another current trend, the promise of cloud computing? What will happen to console development when there's no console?

Rein says he played Epic's own Unreal Tournament 3 via OnLive at DICE and said it impressed him -- but that PC gamers who enjoy state-of-the-art gaming PCs may be disappointed, but that for others it's a "great way to experience PC game content."

"I was just blown away how well it plays," he says. "If you're that super hardcore player who plays it on the most asskicking-est PC money can buy, you notice lag… maybe everything isn’t turned up to 12, but if you’re a gamer who doesn’t want to go erect a big fancy pc like that… it’s really fun."

And when it comes to another innovation, motion controls, Rein also sees opportunities. "Microsoft is making a bunch of Natal games with our tech," he says. "They showed me some that they haven't announced, and they were really cool. The one game that I played the most blew me away -- I would definitely buy that game, and I could see me and my kids playing it in front of the TV. But it doesn't have to be one or the other; you can have a great Natal experience, and then you can go play Modern Warfare 2 or Gears 2," he says.

Gamasutra also saw an Unreal tech demo in stereoscopic 3D, with customizable field depth. Combined with the new surface animations and the other updates made to UE3, the lifelike look was frankly stunning.

And according to Rein, the advancement of tech like this will determine when the next hardware generation arrives. "I think a good justification for the next console would be to take a game like Gears of War, play it at a full 1080p, 60 frames per second with twice as much stuff on the screen, and a gig of RAM instead of half a gig -- but I want to play it stereoscopically," he hypothesizes.

"Think about the PC you’d have to build," he says. "But that’s the beauty of the console… they build it with the future in mind, so you can put in all these great parts. The justification for another big hardware spend is… they’re gonna wait until they can build something like that at $300 or $400," he adds.

That's not ten years away -- Rein estimates the industry will spend a few years focused on PlayStation Move and Project Natal to refine the ideal usages of the experiences they provide.

And when this phase of experimentation with new technologies helps the industry continue refining on the ideal console experience, new platforms will launch when those ideal experiences can't be achieved without them.

"Motion control, gorgeous 3D, more hardware power," enthuses Rein, "And there’s no reason not to do it. You can’t do it any other way. You can't do that without building another console. You can never deliver that [on the cloud] without a client computing system like a console."